Travis County Commissioners Court
November 30, 2004
Housing Finance Corporation
Let's call to order the Travis County housing finance corporation. Item number
1 is consider and take appropriate action on request to approve an invoice
for financial advisory services.
>> good morning, harvey Davis, manager for the corporation.
And I知 here with our financial advisor, mark o'brien and cliff blunt, our
attorney. I知 requesting the board approval to pay an invoice for $7,000 to
our financial adviser and this is for the work he did on two bonds that have
closed. The travis station bonds. These were issued in March of 2004. And
the rosemont at old manor bonds that were issued last August. The -- on both
of these issues, the corporation was paid the application fee of $11,000 each,
which is the source of funds to pay the financial adviser.
>> second.
>> motion approved by director Gomez, seconded by director
Davis. Discussion? All in favor? That passes by unanimous vote. Number 2 is
to consider and take appropriate action on request to approve minutes of board
of directors meeting of August 10, 2004.
>> so moved.
>> second.
>> discussion? All in favor? That passes by unanimous vote.
3, consider and take appropriate action to wire funds to the trustee for the
2002 single-family mortgage program to pay for an additional 1% of downpayment
assistance.
>> and I知 requesting board approval to wire $22,437.76 to
bank of new york who is the trustee for the 2002 program, and the reason for
the wire is that in last June 22nd the board approved supplementing the lot
number 6, a $2 million lot for the single-family bond program. This lot --
this particular lot was fully originated. In fact, a little more than $2 million
in mortgages were done. I believe it's 20 mortgages. And so the 1% of the
amount of the mortgages represents the 22,437.
>> so moved.
>> let me make sure I understand what that 22,000 plus represents
now.
>> the corporation in June agreed to increase the downpayment
assistance from 4% to 5%. And so this 1% supplement is 1% of the phorlgts
which was $2,243,746. And in the backup is the request from the trustee for
these funds.
>> now I understand. Any discussion of the motion? All in
favor? That passes by unanimous vote. Number 4, an item drafted by lawyers
-- [laughter] -- consider and take appropriate action on request to approve
resolution authoring the sale of mortgage-backed securities and subsequent
redemption and payment of single-family mortgage and revenue refunding bonds,
gnma, that's ginny may. Tax exempt series 2000 b, approving the form and substance
of and authorizing the execution and delivery of documents and instruments
necessary to carry out the purposes of this resolution. And containing other
provisions relating to the subject. Of which all lawyers know but we do not,
but that's -- that's how we do business, I guess.
>> in all fairness, number 5 which is much shorter was also
drafted by the same lawyer.
>> if it's relating thereto the subject, we're happy with
that.
>> thank you. This is similar to an item we had months ago
where the 2000 bonds have reached a point where the principal amount is low
enough they can be redeemed. I guess the initial projections are once they
are redeemed and the expenses are paid, a little over $50,000 would be left
and available to be distributed to the corporation after that's done, and
this is all according to the terms of the indenture and the bonds that the
bond holders agreed to when they purchased the bonds. I don't know if mark
has anything additional to say.
>> no, judge, this is a cleanup call once the mortgage is
paid off, we have a small amount and witness you get below a certain threshold
you can pay off the bonds and the remainder goes to the corporation.
>> that's what we do and the good news is that we basically
receive $50,000 for sufficiently expeditiously getting it done.
>> that's correct, sir. We occasionally look at your old
issues and see if there's that kind of opportunity and this is on the one
of those.
>> makes sense to me.
>> second.
>> discussion? All in favor? That passes by unanimous vote.
Number 5 is to receive update on and take appropriate action regarding redemption
and payment of single-family mortgage revenue refunding bonds, ginny may and
fnma.
>> this is a situation not quite as positive as the previous
one. This was the transaction that we agreed to redeem a few months ago. After
the board adopted the resolution in September, the working group went forward
and accomplished everything that needed to happen and on November 19th, the
1994 bonds were completely redeemed. What had been projected to be a residual
of approximately $100,000 after that redemption ended up being approximately
$95,000. Unfortunately as two or three days prior to the redemption a couple
weeks ago we found out that back in 1994, that that residual which was the
$95,000 that would have -- that we thought was going to come to the corporation
had been sold at closing to another party. And so the funds were legally the
property of a company called chambers, dunnhill and rubin and company out
of l.a. So with a lot of scrambling and so forth, the recipient of those funds
was agreeable to allowing the corporation to keep 25% of the amount that they
were due just as an accommodation for having gone through all this and done
it even though the corporation really wasn't legally entitled to any of it.
And so, you know, I realize that you all were expecting quite a bit more and
if you would like to, we can get into a little bit of the reason why that
happened, but we jugs wanted to come -- just wanted to come back and give
you a report as to why that didn't turn out as we had projected a couple months
ago.
>> [inaudible] [laughter]
>> is that a typical kind of thing? It was really a refunding
kind of gig that was meant to benefit the corporation. That it was time to
do the call, blah, blah, blah. And not that somebody else would go, cool,
you all did the work and thank you for our lottery ticket.
>> well, as I understand what happened in '94, in order to
get that transaction done, those were very difficult transactions to do at
the time. And this chambers, dunnhill, rubin and company arranged to have
a company to come in and purchase and that allowed cost of issue I answer
in '94 to do the transaction and that's why that residual was sold by the
corporation at that time. It was done at the actual closing of the bonds in
1994. There's a variety of reasons that it didn't turn up and it was kind
of an odd set of circumstances as to how it did turn up before the redemption,
but the -- that sale of residual was not reference understand the indenture
which is a document the parties go to to determine those things. The trustee
apparently didn't get that information entered into their system. And which
are really the two methods that normally something like this would have shown
up. And we're apologetic that it didn't show up before that and that the amount
was reduced, but I know there's some expectations that were raised about the
amount of money, but legally there was never really -- it was never realty
corporation's money to begin with.
>> is that abnormal? That's not the way we normally do these.
This is one of those it's unfortunate, but that's not normally how things
are done.
>> at that time period there were some transactions done
like this, but it was a little unusual tore that to be done.
>> actually we did quite a few of those and other clients
in the mid and early 90s when we were scramble to go find money to make the
deals work so you looked for something with value and sell it. And so that's
what chambers dunnhill did at the time. And if I recall correctly, our original
trustee was not the trustee that holds the papers now. This bank actually
was out buying up others. They bought up, I believe, nations bank and frost
and some others. And u.s. Trust. And when all that was transferred over, it's
not -- it wasn't clearly highlighted in those documents what that was and
it wasn't entered into their system. So when mark asked them if there was
a residual holder, at first it was not apparent that there was. And it was
really quite by accident and -- that a few days before we were going to sell
these is when mr. -- the fellow at chambers mentioned it to mark in another
conversation and the light bulb went off and we started looking and we already
had your transaction cued up ready to go. And when mark explained it to him,
he agreed to give you 25% of this when you really weren't spwaoeulgt to do
any of it.
>> on previous items though, that was 50,000, harvey, that
had not been anticipated coming to the corporation.
>> not in our budget.
>> not in the budget. For all of us kind ever going 100,000,
how do we get 100,000 to habitat for humanity, we still salvage about 24,000
off number 5, but we have 50,000 that could be add to do the pot.
>> exactly.
>> okay.
>> under the rationale, though, carrying the agony or the
loss, I did ask mr. Blunt to contact the trustee and request payment to the
corporation of 25% of this amount.
>> and I have had several conversations with the trust officer
in the last several days. She was still contacting and talking to her boss,
and as of I talked to her last about 8:45 this morning and she didn't have
a response from her boss. She promised me she would get back with me today,
but by the time I left the office, she hasn't gotten back to me.
>> my position was this should be brought to the board's
attention. I do think we ought not take action until we get word from the
trustee. Exhibit a, is this the same trustee?
>> yes.
>> so the trustee received $1,500 for its role in the transaction.
>> yes, sir.
>> they haven't received it yet.
>> the 71,000 whatever money chambers and company agreed
to receive in exchange for the residual has been sent to them, but the balance
of the moneys, the 23,000 to the corporation and all those expenses, the trustee
is still holding in escrow pending instructions from the corporation about
disbursing it. So it hasn't been distributed yet. It's still being held by
the trustee.
>> $1,500 has not been paid. The trustee has not paid that
amount.
>> talking about different trustees?
>> same trustee.
>> then add to my request and waiver of the $1,500.
>> i'll be happy to amend that request.
>> and judge, there is no residual on the 2,000. We're very
clear on that. Checked and double checked. No residual was sold on the 2,000.
>> my recommendation is we have 5 back on next week. Ask
cliff to notify the trustee that we delayed action pending a formal response
to our legitimate, appropriate and public oriented request.
>> yes, sir.
>> adding the other adjective to that.
>> thereto.
>> you may want to use equitable. That's a good legal term.
Anything further on 5? We'll have it back on next week. Number 6 is -- thank
you all very much. Consider and take appropriate action on compliance audit
of the lake view apartments.
>> I知 here with Karen curtis who is with cutstone management,
which is the management company at lakeview apartments. September 16th we
initiated a compliance audit at the lakeview apartments. The compliance audit
was to assess whether the apartments were leasing at least 20% of the units
to families whose income is less than 50% of the Austin area median income.
And that they are leasing 90% of the units to what is called eligible tenants,
and those are tenants whose income is less than 80% of the Austin area median
income. When we went out there in September, they were not able to provide
us with a list of how all the units were classified. This apartment complex
has 504 units. So it was -- it was not really -- we were not really able to
complete an audit without a -- you know, their telling us out each unit were
classified and the number of units they were saying were low-income eligible
tenants. We waited until they had completed that least and November the 18th
we went back out there and we looked at mostly low-income tenant files. They
are -- I知 reporting to you that they are not in compliance with the low-income
tenant leasing requirements, nor are they in compliance with the eligible
tenant income requirements. As far as the low-income leasing requirements,
they have to lease at least 101 units to low-income tenants. And I think your
backup says 93 units. We have done a little more work on this and it's social
between 94 and 101 units. But they are not in compliance. And on the eligible
tenant issue, they are -- they have 408 out of a required 454 units leased
to eligible tenants. So they are, of course, further behind on that issue.
So I am -- well, first Karen can answer any questions that the board has as
far as the situation out there. I am requesting that the board approve sending
a letter, a cure letter by our attorney notifying them that the 60-day cure
period would starting today and then after the 60 days or at the 60 days would
go back out there and redetermine -- another on-site visit and make a determination
whether they had regained compliance on the low-income or eligible tenant
issues and then come back to the board.
>> so right now they are out of compliance in that instead
of 101 units being occupied by low-income tenants, the number is actually
95?
>> well, in my -- I can tell you 94 units.
>> 94. Is there agreement on that?
>> yes. We actually went through after harvey left and tried
to find out how many move he ins with had cyst harvey's audit and yesterday
and we had two more 50% units and two more 80% units for the property. So
we're about right now five short of meeting our set-aside.
>> okay. Five short of 101 is 96.
>> the 50% units are the low income. I think the 94 plus
the two is 96, right?
>> yes.
>> so you are five short. And your name again?
>> I知 Karen curtis.
>> and ms. Curtis, you are with --
>> capstone real estate services.
>> so low-income units 96 instead of 101. Is there another
noncompliant --
>> and as far as -- yes. Eligible tenant requirement.
>> and what are the numbers on that?
>> well, you said it would be 410 units are -- would be leased
to eligible tenants, and the requirement is 454 units. So they are 44 units
short.
>> 44 short. So these are occupied?
>> and I got harvey's memo, but I didn't realize the numbers
-- I just asked, apparently there's a little over 400 units that are actually
occupied. I think the occupancy is running about 81%, which is considerably
better than the last time we heard about this property so that's good. But
I believe there's a little over 500 units so there's somewhere between probably
400 and 410 units occupied. I need to go back and check the regulatory agreement
and see how unoccupied units are affected. And I知 sorry I didn't do that
is correct but I didn't realize that was what this situation was in terms
of the occupancy. I can do that and let you know.
>> and I believe capstone has -- and we have looked at how
to properly classify all the vacant units.
>> okay. I知 sorry, I just hadn't looked at that yet.
>> they now have provided me a list of how every unit whether
it's occupied or unoccupied has been classified.
>> so we're dealing with 45 short in eligible category?
>> yes. 44. Yes, sir. My -- I mean I think that in the 60-day
cure period that they would probably -- they would -- should be able to easily
regain compliance on the low-income part and probably would need more time
on the eligible tenant issue because there's so many vacant units out there.
>> so the vacant units are actually counting against them?
>> not necessarily. If somebody has moved out and that unit
was, say, a low-income unit, it continues to be low income until it's reoccupied,
so it doesn't count against them. I think one of the -- one of the problems
that this apartment complex had was when this -- when these bonds were issued,
they had extremely poor management for maybe a year --
>> Karen was not there at that time.
>> no, capstone was not the management. Capstone came in
and rescued this apartment complex. But they had very poor management. And
they -- they were not -- they did not do the paperwork. And we did an audit
probably a year into it and, you know, it was a big mess. And -- but they
were able to be in compliance with the low-income tenant requirement. And
I would say that when we went out there in September, I mean they should have
had a list and they should have known that they were a little short on the
low-income tenants. So, you know, right now they do have a good running list
and that's, of course, helpful.
>> anything further from --
>> no, I don't think so.
>> Karen, do you know what the [inaudible]?
>> overall I do not know.
>> do you know, harvey? I mean isn't it --
>> it's improving.
>> it's in the 92 to 93 range?
>> I think it's in the low 90s. And I think they --
>> that tells you a lot, you know, right there, given that
they are that much below the other -- which means struggle a little bit --
and I知 very familiar with the property. I知 surprised they can get as close
as they can.
>> yeah, I think our goal is to get to 90%.
>> 90% probably would get you there. And, you know, the 60
days, you probably -- because this is the period, sort of that midterm deal
where you will have some people finding some or needing some dwellings. That
will probably help you out.
>> right, and of course these bonds are issued in 2001 and
at that time the occupancy was in the upper 90s and all their projections
were based on a 95%-plus occupancy.
>> the recommendations we authorize cliff to send one of
his phaoerpb-spirited cure letters.
>> yes, sir. And that I initiate a second, a third on-site
visit at the end of January and report back within the first two weeks of
February.
>> move to approve the recommendation.
>> second.
>> discussion? All in favor? That passes by unanimous vote.
We do appreciate the apartment complex working with us on this.
>> thank you.
>> all in favor? That passes by unanimous vote.
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Last Modified:
Wednesday, October 26, 2005 2:44 PM